InterviewNeste Oil biofuels to regain profitability from Q4 ’09

05 March 2009 10:21[Source: ICIS news]

SINGAPORE (ICIS news)--The renewable fuels business of Finland’s Neste Oil will regain and maintain profitability by the fourth quarter of 2009, said the company's deputy CEO and executive vice-president Jarmo Honkamaa on Thursday.

"The cost of the business is totally imbalanced at the moment," said Honkamaa, referring to the estimated €20m ($25.3m) that the company allocates towards research and development (R&D) activities against the company’s sole, fully operational facility that is capable of producing 170,000 tonnes of NExBTLbiodiesel per annum.

"As long as we only have one plant, it is a bit unpredictable what the numbers will be [for the first quarter of 2009].We’ll start the second plant in summer, then we would have doubled the business to support the organisation and these costs," he said.

"So, by the fourth quarter of this year, we should be consistently on black numbers."

Neste Oil has a second NExBTL facility, in Porvoo, Finland, with a capacity of 170,000 tonnes/year, which is due to come on stream by July 2009.

The company is also planning to complete its third and fourth 800,000 tonne/year units in Singapore and Rotterdam by 2010 and 2011 respectively.

"If you just take the economics of the [No 1] Porvoo plant, it was profitable in every single quarter. But of course we had a lot of project development costs and R&D. That’s why the numbers are what they are," said Honkamaa.

The renewable fuels segment recently reported a comparable operating loss of €10m for its fourth quarter ended 31 December 2008, which reversed a profit of €3m in the previous corresponding period.

Honkamaa said that the company’s Singapore dollar (S$) 1.2bn ($779m) NExBTL facility on Singapore's Jurong Island is scheduled to be completed by mid-2010 and will begin commercial operations from the autumn of 2010.

He said that a vast majority of the 100 people Neste will need to employ once the plant becomes fully operational will be Singaporean, with the company looking to hire between 50-60 people for the facility during the year.

Biodiesel that is produced from the Singapore plant will be shipped to Europe and North America, Honkamaa said.

"We have already made some commitments [in volumes] from the Singapore plant to North America, including Canada," he said, adding that the company is currently supplying the region with material from the plant in Finland.

"We are [also] talking with players in Japan," Honkamaa said.

He also said that there is an interest to include bio-content in fuels. "But Europe is the backbone of the market because mandated volumes are already so high."

There is already a significant amount of volume commitments towards European customers once the Singapore facility turns operational in 2010, Honkamaa said.